Having conducted nationwide conferences in 23 cities with the trade and industry, the ASSOCHAM has suggested removal of a provision in the revised Model Goods and Service Tax (GST) Law dealing with anti-profiteering since it is open to misuse and subjective interpretation.
In a detailed representation to the Central Board of Excise and Customs (CEBC) and the Finance Minister Arun Jaitley, the ASSOCHAM has also sought clarity on a wide range of issues like location of recipient and supplier of services and the treatment of related party transactions.
In terms of section 163 of the revised Model GST Law, the Central Government has been given powers to constitute an authority to examine whether input tax credits availed by any registered taxable person, or the benefit of a reduction in the tax rate, has resulted in a commensurate reduction in the price of the goods/services supplied by the said taxable person. Also, the said authority would have powers to impose penalties where the prices of goods/services supplied are not reduced.
While the intent of such a proposal cannot be questioned, the industry believes that it will be very difficult to implement and the costs of compliance and administration will significantly outweigh the risks that some businesses will seek to ‘profiteer’ from the change in indirect tax systems. This difficulty is exacerbated by the short implementation timeframe which makes ‘price manipulation’ difficult.
With regard to location of recipient and supplier of services for the purpose of ascertaining place of supply, the chamber has said the concept of business establishment be introduced (which should be only one location per legal entity) For sake of simplicity, such as location could be the billing address of the recipient/ supplier.
In cases, where the place of supply is determined based on customer’s address, it is not clear as to what would constitute the location of service provider. For examples, an insurance company may issue policies from a head office to all customers (across various states) and all the key decisions might be undertaken from such office. However, the insurance company may also have branch offices in different states (including the state where the customer resides), which are generally marketing offices and also provide support to customers on day to day basis. In such a situation, it is not clear as to whether the company can raise invoices from the head office and pay IGST, in case the customer is outside the state. Similar issues may be relevant for debit/credit card transactions of financial institutions and their customers.